Many buyers want to buy a foreclosure in todays real estate market because they are looking for a deal. If you are a buyer looking to buy a foreclosure in todays real estate market, there are some terms you should know more about. Two words that you may hear bantered about are REO and Short Sales. What do these terms mean and more importantly which is better for you as a buyer.
The first is an REO, which is short for Real Estate Owned. This is a property which has been through the foreclosure process and is now owned by the lender. The second is a short sale, this is a property where the current loans exceed the value of the property and the seller can not pay the difference therefore the lender or lenders must take less than is owed them, a short payoff.
As s buyer, which of these is better for you? Well that depends on your personal situation. Both have benefits and pitfalls. As a general rule, buyers who are looking to move into a property on strict a timeline are better suited with an REO. A buyer with alot of flexibility, may want to look at a short sale.
With an REO, everything is much more clear cut. First of the property is vacant, which allows the buyer to easily see what cosmetic repairs may be needed. While the lender of record may take a few days to respond to your offer, once a contract is agreed upon, the terms such as close of escrow date are set. This allows you the buyer to plan when you are going to move.
With an short sale, things are not quite so clear cut. The property tends to still occupied by the sellers, who are being foreclosed on by the lender, therefore they may not be the happiest. Because the property is occupied, not all cosmetic problems may be noticed. Here is the big one, when you make an offer on a short sale, the seller is not making the final decision the lender is making the final decision. In the case of a short sale you the buyer may not hear back on your offer for weeks, sometimes months. Needless to say this can be challenging if you need to when you are going to move. This may be acceptable if you are an investor, but for a buyer with a family this may not be best.
So with these challenges with a short sale, why would any one want to buy a short sale? Well if there is a specific home you want it may be better to deal with hassle then to wait for the foreclosure process to be completed and for the lender to evict the current owners. The other reason is that they can prove to be great values, the lender may be willing to except less as a short sale than going through the cost of the foreclosure process. Therefore the benefit of a great bargain may be worth the wait and the hassle.
How do you which is best for you? The best way is working with a knowledgeable and experienced real estate broker who is familiar with the local real estate market and the foreclosure process. If you are looking at buying or selling real estate in Orange County call us at 949.355.3000 or visit our web site at http://www.ocmlshomefinder.com/.
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